Y-12 security breach costs B&W $12.2M in fee

A fence surrounds the Y-12 National Security Complex along Pine Ridge on Wednesday, December 19, 2012. According to officials, this is the area near where members of Transform Now Plowshares entered the facility. (Saul Young/News Sentinel)

2012 Knoxville News Sentinel

B&W Y-12, the government's managing contractor at the Y-12 nuclear weapons plant, had its annual fee chopped by $12.2 million because of the unprecedented security breach that occurred under its watch.

The fee reduction for Fiscal Year 2012, which concluded Sept. 30, was posted Friday on the National Nuclear Security Administration's website. However, the NNSA, a semi-independent part of the U.S. Department of Energy, has not yet released B&W's full performance evaluation for 2012.

The Y-12 contractor, a partnership of Babcock & Wilcox and Bechtel National, received only 58.9 percent of the total available fee for the period. That's by far the lowest percentage of B&W's 12-year tenure as the Oak Ridge plant's manager.

The financial loss is the latest fallout from the July 28 break-in by three Plowshares protesters, who cut through multiple security fences and walked undetected and unmolested to Y-12's high-security inner core known as the Protected Area. Once inside, they spray-painted peace slogans and anti-nuclear messages on the concrete surroundings, splashed human blood on a wall of the storehouse for bomb-grade uranium, and performed other protest actions before finally being detained and arrested. The three — Sister Megan Rice, Michael Walli and Greg Boertje-Obed — are facing three felony charges associated with the break-in, and their trial is scheduled for May 7 in U.S. District Court.

According to the NNSA, Babcock & Wilcox Technical Services Y-12 LLC, a partnership of B&W and Bechtel National, was given a "very good" rating for Program; a "satisfactory" rating for Operations; and a "very good" rating for Institutional Management and Business.

The government awarded B&W Y-12 a total fee of $35,862,741. That was out of a total available fee of $60,863,521.

"As a result of the July security incident, B&W Y-12 lost a total of $12.2 million in award fee, which includes 100 percent of their possible security-related fee and a negative overall management fee adjustment of $10 million," the NNSA stated on its website.

That was a huge comedown from the previous year when B&W Y-12 received an overall performance rating of "excellent" and earned a fee of $51.2 million.

In a statement released by corporate spokeswoman Aimee Mills, Babcock & Wilcox said it was "understandably disappointed" with the fee reduction as a result of the July security incident at Y-12.

"Following the security breach in July, B&W worked closely with B&W Y-12 (a partnership of B&W and Bechtel National) and NNSA to expediently implement corrective actions. We remain committed to ensuring the highest levels of safety and security at the Y-12 National Security Complex," the corporate statement said.

It's been a particularly rough week for Babcock & Wilcox. On Tuesday, the National Nuclear Security Administration awarded a new contract for the combined management of Y-12 and the Pantex nuclear weapons facilities to Consolidated Nuclear Security LLC, a team headed by Bechtel National and Lockheed Martin. B&W, which reportedly joined with URS, Northrop Grumman and Honeywell on the rebid, was a disappointed loser on a contract that has a potential value exceeding $22 billion over 10 years.

Michael Lempke, a high-ranking official at the National Nuclear Security Administration, said in a teleconference with reporters that July security breach at Y-12 was among the factors considered in awarding a new contract. However, Lempke emphasized that neither that incident nor past contracting performance in general was the deciding factor in the contracting decision.